Turkish Economy Grew at Slower Pace After Central-Bank Hikes

By Ed Frankl

The Turkish economy slowed in the third quarter, likely a result of a squeeze on spending prompted by higher central bank interest rates.

Gross domestic product rose 0.3% on quarter in the July to September period, on a seasonally and calendar adjusted basis, down from the 3.3% in the second quarter, according to data from the country's statistics office, Turkstat, published Thursday. Compared with the same quarter a year ago, the economy expanded 5.1%.

The lower growth rate comes after Turkey's central bank pursued more conventional monetary policy, hiking up its interest rate from 8.5% in May to 40% in November.

"With the central bank set to keep interest rates at a restrictive level over the coming quarters, growth looks set to slow further in 2024 and this will help to narrow the current account deficit and cool inflation pressures," according to Capital Economics economist Liam Peach in a research note.

Inflation, which was 61.3% in October, remains a concern for the country, though the central bank signaled earlier this month that monetary tightening could slow as borrowing costs were close to the level required to lead to easing inflation.

The slowdown of the economy should provide the central bank with further evidence that demand is weakening and the economy is rebalancing, Peach said, adding that there is a chance Turkish GDP could contract in the fourth quarter.

Write to Ed Frankl at [e-mail]

(END) Dow Jones Newswires

11-30-23 0351ET